Russian newspaper Izvestia is reporting
that the central bank will cut rates by 2-3% from its current
rate of 17% in the first quarter of 2015, according to a source
who participated in a meeting of the National Financial Council
(NFC) under the central bank in late December.

"Representatives of the regulator explained [the rate cut] by
noting that the increase in the rate did not bring the
expected result," the source told Izvestia. "It was
intended to curb the rise in the dollar and the euro, but that
did not happen. The course grew, the reaction from the population
and businesses was really negative. The central bank basically
admitted that it made a mistake during the last NFC meeting in
2014."

Additionally, the head of the central bank, Elvira Nabiullina,
named the conditions for lowering the key rate during a press service on
Wednesday:

"The Board of Directors of the Bank of Russia, taking the
decision on the key rate, first and foremost, is
based on the need to curb inflation, which in the
current environment is a high-priority problem for people and
businesses. The Bank of Russia will be ready to lower the key
rate if there's a formation of a stable downward trend in
inflation and inflation expectations, which are currently still
high."

Back in mid-December, the Bank of Russia
unexpectedly hiked
rates to 17% from 10.5%. The bank's statement said the
decision was driven by the need to limit inflation risks and
significant devaluation in the ruble.

The day following the rate hike, the Russian
currency fell to new lows, reaching 80 rubles to the
dollar.

Russians reacted extremely negatively to the rate hike. One
banker apocalyptically declared that this was
"the
end of the banking system," regular Russians were scrambling
to get their hands on
dollars, and Russia's richest
lost $10 billion in the three days following the decision.

And things
haven't gotten much better since then. Currently, the ruble is
trading at around 66 per dollar, inflation is high, and the
collapsing currency has led to
food shortages.

Although the
press service of the central bank has so far denied this, on Jan.
16 the bank's first deputy chairman, Alexei Simanovskiy, stated
that he hoped for an opportunity to reduce the key rate in the
near future, according to Izvestia.